This year we are on pace to hit that magic $1,000 mark with over $700 earned so far (as of July 2015). With several months remaining in the calendar year, we should blow that $1K out of the water by a few hundred dollars.

Next year we should be on pace to earn twice that amount – $2,000 in dividend income. While it does take a good amount of capital to invest and reach these income levels, it is easy to lay out a plan.

All you need is some patience and time. Lots of time actually and careful planning.

What is Special about $1,000?

So what is so special about earning $1,000 in dividend income? Not much really. Other than it is a milestone that many dividend investors strive for.

The first goal for a new dividend income investor may be to earn $100 a year. Then maybe $200 or even $500. Somewhere along the line, I am sure every dividend growth investor sets a threshold of $1,000 as a milestone.

Once that $1,000 is met, then $2,000 may be the goal or even $5K or $10K.

My wife and I are approaching our $1,000 milestone later this year. While we have plenty of work still to be done reaching our goals, it feels cool knowing we will make a nice grand in dividends this year without doing much work at all!

How to Reach $1,000 in Dividends

Figuring out how to reach $1,000 in dividends for a year is quite simple really. As long as we are investing in only the best dividend paying companies, it is easy to develop a blueprint to get there.

The next step is to find companies that pay a fair yield (which should be part of your screening process). As part of our stock screening process, we look for companies with a yield of at least 2.0% or higher.

For the purposes of this example, let’s look for companies that pay a yield of 3% or higher. We are assuming that these companies will have had a history of raising dividends for a minimum of 10 years.

The third step is to figure out how much money you will need to invest to raise $1,000 in dividends. Assuming at least a 3.0% current yield, we can plug these numbers into an easy calculation to find our investment amount.

Investment Amount X 3.0% = $1,000 Annual Dividends

By dividing the annual dividends by our current yield, we can estimate that it will take $33,333 of capital to earn $1,000 in annual dividends.

$33,333 X 3.0% = $1,000

Running a quick screen, there are plenty of top notch companies out there currently offering a yield above 3%. For example, Johnson & Johnson (3.08%) and Procter & Gamble (3.39%) have both been raising dividends each year for over 50 consecutive years.

Note – The current yields noted above for JNJ and PG are a point in time and are now out of date by the time you read this.

So in order to raise $1,000 in dividends by purchasing shares in Johnson & Johnson or Procter & Gamble, you would need between $30K to $33K of money to invest.

JNJ = ($1,000 / 3.08%) = $32,467

PG = ($1,000 / 3.39%) = $29,498

You are probably thinking, I don’t have an extra $30,000 lying around ready to invest. You are certainly not alone.

That is why it may be easier to build $1,000 in dividend income by investing one month at a time.

Also – I am not recommending purchasing all your shares in one stock alone. It is important to diversify your portfolio with many quality dividend paying stocks.

Investing One Month at a Time

My wife and I don’t have $30K sitting around waiting to invest. Over the past 5+ years, we have built up our total investments to around $35,000 (update – now close to $60,000) – which will push us over the $1,000 dividend mark (update – now over $2,500) in a few months.

Instead of worrying about having a large sum of money to invest, we took our time investing one month at a time. On average, we have invested about $7,000 a year during this time – which calculates out to just under $600 per month.

Some months we have invested thousands of dollars, while others it has been just a few hundred dollars. It just depends on the month and the amount of available funds that we have to invest.

We have taken advantage of pay increases at my job and invested the difference in income. We have invested our tax refund. We use small windfalls of money and side income to add to our investments.

The point is that it is never to early to start investing and no amount is too small. It has taken my wife and I many years to reach the $1,000 dividend income threshold but we are now quickly approaching $2,000 as the compounding earnings build.

Conclusion

Investing around $30,000 in several quality dividend stocks earning 3.0% yield or higher should help you reach $1,000 in annual dividend income. Whether you invest this amount of money all at once, or you break it out over several years like we did doesn’t necessarily matter.

As long as you have a plan in place to reach $1,000 in dividends, it is certainly achievable. Becoming creative in how you invest can also help reach $1,000 in dividends.

My wife and I could have certainly used our $5,000 tax return on a wonderful trip. But instead we used it to build our dividend income up this year. This move will not only push us to $1,000 in dividends, but will bump us past $2,000!

We will likely do the same thing next year and the year after.

Have you reached $1,000 in dividends yet? What advice can you offer those still working towards this goal?